(Clarifies reason Frenkel withdrew bid)
JERUSALEM, July 31 (Reuters) - Leo Leiderman, chief economist at Israel’s largest bank who has in the past criticised the low interest rate environment, has been nominated as the next central bank governor.
The decision on Wednesday came two days after Jacob Frenkel, Bank of Israel chief in the 1990s, withdrew his bid after media reports of a suspected shoplifting incident in 2006, which he denied and over which no charges were ever filed.
In appointing Leiderman, Prime Minister Benjamin Netanyahu and Finance Minister Yair Lapid opted against front-runner Karnit Flug.
Flug, who had been at the Bank of Israel for 25 years and served as deputy Bank of Israel chief and is now acting governor, said she would step down a month after the new governor is in place and gets to know the system.
“I am excited to get back to the Bank of Israel and I will work to help Israel’s economy in the challenges it faces,” Leiderman said in a statement.
His nomination still needs confirmation from a committee that vets senior civil servants and the cabinet.
The Argentinian-born Leiderman, chief economist at Bank Hapoalim, was likely chosen because of his international credentials such as serving as head of emerging markets research at Deutsche Bank in the early 2000s.
He inherits an economy that is slowing due to the global downturn, tame inflation, and a benchmark interest rate of 1.25 percent.
“Judging by his recent comments regarding the Bank of Israel’s monetary policy, it seems like Leiderman has a more hawkish stance than the current MPC (monetary policy committee) members,” said Yonnie Fanning, an analyst at ILS Brokers.
Leiderman, who spent 10 years at the Bank of Israel in the 1990s, initially supported the steep interest rate cuts at the outset of the global financial crisis but the past few years he has said rates were too low.
Interest rates in Israel are set by a six-member MPC. (Reporting by Steven Scheer; editing by Ron Askew and Sonya Hepinstall)